Commentary and Performance
Just the verbal promise of more QE coming out of Europe was enough to send stocks above some key resistance levels in today’s trading session. The SP-500 closed @ 2052.51 (+33.57 / +1.66%) and the Nasdaq-100 settled @ 4503.22 (+89.70 / +2.03%). Lagging the market was the Russell-2000, which failed to clear near-term resistance levels and ended the day @ 1154.52 (+9.57 / +0.84%). Has anyone considered the market’s reaction should Mario Draghi fail to deliver an effective stimulus package that revives global growth?
The VIX is fully capable of answering the above in a heart stopping beat but instead resumed its downtrend and declined to another short-term low @ 14.45 (-2.25 / -13.47%).
Treasury rates declined a second consecutive day. The 10-Yr rate closed @ 20.25 (-0.05 / -0.25%) and the 30-Yr dipped @ 28.60 (-0.11 / -0.38%).
The Federal Reserve has deferred the interest rate hike that so many were anticipating and others were doubting and this is what sent the dollar into a bearish correction before it reconfirmed support at the 93-94 quadruple bottom levels. Credit for its explosive move today goes entirely to the ECB’s dovish announcement (hat tip to Mr. Draghi). The US Dollar Index closed @ 96.45 (+1.39 / +1.46%).
In our two most widely followed commodities, Gold stepped down to @ 1165.0 (-0.90 / -0.08%) and WTI Crude Oil found support at its 22-day moving average to settle @ 45.49 (+0.23 / +0.51%).
The Dow Jones Real Estate Index achieved a new 3-month high and closed @ 300.12 (+3.32 / +1.12%). Mixed results in housing data undermined the Dow Jones Home Construction Index which recouped most of its losses but still finished in negative territory @ 591.60 (-8.16 / -1.36%).
Daily Chart Analysis
The benchmark index for stocks has broken out of its trading range and must now clear another level of resistance before its ultimate challenge at 2100. Today’s move was explosive. Look to 2020 as a new level of support from which stocks can build a more solid base. Otherwise, the rally is still overextended and vulnerable to sharp bearish retracement.
- Advancers (2176) vs. Decliners (732).
- New 5-day highs (1043) significantly lagged the number of New 5-day lows (673)
- New 52-week highs (222) also trailed new 52-week lows (132)
- Bullish reversals (536) lagged Bearish reversals (128)
Volume Radar Alerts
- McDonald’s Corp (MCD) @ 110.87 (+8.12%) on 312% volume surge
- Carlisle Companies Inc (CSL) @ 85.93 (+2.16%) on 305% volume surge
- CIT Group Inc (CIT) @ 46.14 (+15.70%) on 286% volume surge
- Polaris Industries Inc (PII) @ 109.95 (+1.97%) on 286% volume surge
- VMware Inc (VMW) @ 56.79 (+2.47%) on 272% volume surge
- Community Health Systems (CYH) @ 26.30 (-35.14%) on 1264% volume surge
- Envision Healthcare Holdings Inc (EVCH) @ 25.40 (-30.39%) on 1120% volume surge
- Cabela’s Inc (CAB) @ 34.48 (-17.25%) on 945% volume surge
- GNC Holdings Inc (GNC) @ 34.50 (14.24%) on 718% volume surge
- Westinghouse Airbrake Technologies Corp (WAB) @ 83.74 (-5.43%) on 683% volume surge
Market Moving Events
- Central Banks / Monetary Policy / Europe: As expected, the ECB’s latest announcement left interest rates unchanged @ 0.5% as inflation and industrial production remain weak. Mario Draghi, head of Europe’s Central Bank, indicated the central bank’s flexibility and willingness to reconsider the size and duration of its existing QE program @ $60bn/month.
- Economy / Consumer / UK: Great Britain’s Retail Sales in September-2015 were surprisingly strong, albeit a hat tip to Rugby World Cup. Monthly, they improved to 1.9% vs. estimates @ 0.4% and previous revised @ -0.4%. Annually, they advanced 6.5% vs. forecasts @ 4.8% and previous revised @ 3.5%.
- Economy / Consumer / Canada: Retail Sales in Canada for August-2015 exceeded estimates with results @ 0.5% vs. estimates @ 0.1% and prior revised @ 0.5%. Year-over-year, they expanded @ 2.8% vs. previous revised @ 1.9%.
- Economy / Employment / USA: Unemployment Claims for the week of October-17-2015 were only 3k above last week’s 42-year low with a reading @ 259k vs. consensus @ 265k and previous revised @ 265k. The 4-week moving average is 263.5k vs. consensus @ 265.25k.
- Real Estate / Residential / USA: Existing Home Sales for September-2015 rebounded strongly to 5.5mm vs consensus @ 5.35mm and prior revised @ 5.3mm. Month-over-month @ 4.7% vs. prior @ -5.0% and annually @ 8.8% vs. prior @ 6.2%, the report reflects a positive outlook for the housing market.
- Earnings or Revenues / Positive Surprises: Ebay (EBAY); Texas Instruments (TXN); McDonald’s (MCD)
- Real Estate / Residential / USA: The appreciation rate of the FHFA House Price Index slowed to 0.3% vs. consensus @ 0.5% and prior revised @ 0.5%.
- Economy / Growth / USA: The Leading Indicators Index for September-2015 contracted to -0.2% vs. estimates @ 0.0% and prior revised @ 0.0%.
- Earnings or Revenues / Negative Surprise: American Express (AXP)
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